Electricity and Gas Industries Bill

I am taking a brief call. This bill exhibits the leadership qualities this Government has, unlike that member who has just resumed his seat in mock impersonation of some sort of Napoleonic behaviour. Thank goodness he will never ever lead anybody into battle.

This bill puts in place all the decisions made by the Government this year on electricity supply security and on the governance of the electricity and gas industries. It repairs some of the errors that the previous National Government made. It is a good bill, with a thoroughly good Minister in charge, and the best thing we can do is to get this bill passed so that it can benefit the people out there in New Zealand.

I want to continue on the points being made last week when this bill was being debated. Despite the senior Government whip’s pat reading of the Labour Party’s research lines about the Minister being good and all that sort of nonsense, the real issue is that when this bill was introduced and sent to the Commerce Committee last year, the Government said it had to be passed in a hurry. The Government made the energy companies and the interested sector people put in their submissions over Christmas—whilst the Minister was wandering around on a beach—and the select committee commenced hearings on the bill. We have now reached 12 October and the Minister is still trying to get the bill passed. He has backdated some of the clauses in this bill to 20 May 2003, which is when he deems that parts of this bill will have come into force.

National thinks that retrospective legislation is bad. In a commercial environment it is even worse. The Minister is not unpicking any of the commercial reforms of the electricity market. He is not doing anything for the market. The member for Whanganui clearly had not read the bill before she read the Labour research unit’s notes, because she alluded to the fact that this bill fixes up and changes a whole lot of the market. No, it does not. What it does is set up a bureaucracy to watch over the market, and sets up some rather convoluted workings between the Commerce Commission and the Electricity Commission, which, in fact, endanger the independence of the Commerce Commission.

As well as that, the bill overrides some of the contractual arguments or arrangements that might be occurring in the sector, and I want to particularly focus on those. Transpower charges lines companies, for example, for work that is being done or that has been carried out, such as upgrades and the like, by means of its transitional pricing methodology—so it is the lines companies who end up paying, in the end. One part of the bill provides that Transpower’s pricing methodology is deemed to have come into force on 26 January 2004. The bill was before a select committee, the Government clearly did not have an open mind on whether things would be changed, and it has now said, with regard to a whole lot of commercial arrangements, that it is too bad about any arrangements or disputes, because the State will use its power to ensure that Transpower gets paid what it requires. Of course, what happens is that individual consumers end up having to foot the bill, because they cannot contest it and the arrangements have run over the top of existing commercial arrangements.

I think that is bad. This matter was so urgent that it had to be passed quickly. United Future members voted procedurally with the Government, as they always do; they lay down on their backs and decided that this bill should go to a select committee and be dealt with really, really quickly and urgently. Then, of course, United Future did not put anybody on the committee anyway. They did not bother with it, so I guess it is to the fore for them. But what has happened is that the bill has come back before the House, taking not just 1 or 2 weeks or even 1 or 2 months to get to that stage, but months and months and months. We believe the dates in the bill should be changed, and we have put forward an amendment providing for that. We believe that it is commercially unfair to backdate it as far as it has been backdated.

I have to say that New Zealand First shares some of the concerns raised by the Hon Roger Sowry. We are concerned that this bill is being made retrospective by quite some time, and perhaps the Minister could take a call to explain why it has to go back that far. This Government, only a week or so ago, said that when it came to criminals it was impossible to go backwards. It said that it was impossible for the Government to apply retrospective legislation in respect of guys who are thugs, murderers, and goodness knows what, but for law-abiding people, it can go back something like 18 months. That just does not sit comfortably with New Zealand First, because—as the Hon Roger Sowry has said—this bill has at least the potential to override some serious contractual arrangements.

I have said before that we in New Zealand First looked for three things in this bill. Would this bill address security of supply? We believe that by giving more teeth to the Electricity Commission, it probably does address that issue very largely. Will it reduce prices? Well, we do not believe that it will. We believe that this bill could be a formula for increasing prices. I personally had some confidence in the cheap lines charge of 30c a day plus a higher unit for power, and that confidence was shared by most, if not all, of my colleagues. However, recently I was in Dunedin, and the people there said: “Well, that might be all right and fair and proper for you guys in Tauranga, but come down here in the winter and see whether you can live on 8,000 units a year.” They told me that it was quite impossible, and that for Dunedin people it should be around 13,000 to 14,000 units, as it is so cold down there. I was there on a sunny day and I have to say that it was a bit chilly. So we do not believe that this bill will go terribly far towards reducing prices for the average consumer in particular, or even for the business consumer.

So the third question that we asked ourselves was: will this bill create a climate for greater investment in the industry? We have seen nothing that gives us any confidence that it will achieve that. In fact, we think that the best opportunity to increase investment in the industry would be to open up and take a more liberal attitude towards lines companies, and allow them to do so. They have millions of dollars that they want to invest in electricity. The only place they can invest in electricity is outside New Zealand, and the logical place for them to do so is Australia. I understand that several, if not many, of them are looking at investing in Australia or at using their finance to invest in some other sort of activity, altogether.

I have to come back to this. Had United Future shown a little bit more keenness, willingness, or conscientiousness towards this bill, we might have got something. Had that party put a member on the Commerce Committee—even though the member could not have voted, he or she could have turned up to hear the submissions—we might have got somewhere. But, no, United Future told members in the Committee that they did not like the maximum of 25 megawatts a year for lines companies and they wanted to increase it to 50 megawatts as an appropriate percentage. Those members did a deal in a back room somewhere—I was going to say a smoke-filled back room, but I do not think that it was smoke-filled. They did a deal, and that is not democracy.

The United Future members are shocking. Had they come to the select committee, they would have heard several representatives of the lines companies saying that they wanted to have a better opportunity to invest in the industry. They have the money and expertise, and they could increase the total capacity for New Zealand. The total capacity right now, as I understand it, is about 8,700-plus megawatts a year, and, on an ever-increasing basis, we need another 150 megawatts a year, every year from now on. If we believe Bryan Leyland, we will have to double that. I am not expert enough to say what exact amount we need every year, but it seems that there is a very good degree of common ground that is saying we need a lot more electricity capacity every year. The fundamental solution to that is investment, and the lines companies are the only people with the money to do it.

I will take a brief call in response to some of the remarks made by Peter Brown. There are two points. In terms of his accusation about backroom deals being done, there were no backroom deals. I raised the matter of increasing the megawatts from 25 to 50 here in the Chamber in a public debate that followed the cancellation of Project Aqua. Secondly, I wrote a letter to the Commerce Committee in that regard. In due course the select committee wrote back and notified me that it had received it and had considered it.

The National Party opposes this bill. It is interesting having the title debate the way we do now. I can remember many, many days in this Chamber having title debates where it was, to say the least, very difficult to keep to the point. Usually, they became quite ridiculous as members thought up different names for a title. I think that it is good that we now have the title debate at the end, with a more wide-ranging debate to discuss the bill.

The National Party does oppose this bill. We agreed with submitters because they expressed concern over the Electricity Commission’s design. This institution’s advisory, operational, and regulatory roles will place it at risk of serious performance failure and judicial review. There is a belief that it will fail to achieve the independence required to be an effective and credible regulator.

We know that this country has suffered from a lack of investment in infrastructure under this Government. We have heard a great deal of rhetoric about the need to develop infrastructure, to develop our roads, and to have a security of electricity supply. In the Chamber today we have been talking about that. We have been talking about the fact that we have 8,700 megawatts of generation, and that we need so much more than that to be able to guarantee certainty of supply and price. A country cannot develop if it does not have those infrastructure situations correct and the ability to develop them. Twenty-five years ago this country had wonderful roads. Twenty-five years ago a lot of electricity was generated.

💬 Gordon Copeland: I raise a point of order, Madam Chairperson. The member alluded to the fact that the Standing Order in relation to clauses 1 and 2—the title of the bill and the commencement date—has been changed, and that we no longer have wide-ranging debates on those clauses. I am yet to hear the member mention either clause or speak to them.

The CHAIRPERSON (Ann Hartley): The Standing Order has been changed to allow a more wide-ranging debate when we take those clauses at the end. Do members want it read out?

💬 Lindsay Tisch: My colleague Dr Scott has taken part in previous debates in the Committee stage. She is familiar with the issues and is contributing now in the final debate, which concerns the title of the bill and the commencement. As you have indicated, Madam Chairperson, and as members well know, this is a wide-ranging debate that is like a peroration that brings together the arguments we have canvassed and articulated over the course of the Committee stage. That is the position Dr Scott is taking, and she should be able to continue in that vein.

The CHAIRPERSON (Ann Hartley): I will just quote for members from the review of the Standing Orders: “However, we consider that, when debating the preliminary clauses at the end, members should have some latitude to summarise,”—that is really what is intended—“and make concluding remarks about, the issues they have raised during the committee’s consideration of the bill.” I thank Mr Tisch. Did he want to add something more?

💬 Peter Brown: I draw to your attention the fact that the member who raised that point did not speak once to the title nor make reference to the commencement date.

The CHAIRPERSON (Ann Hartley): That is not relevant because we are clarifying the point.

I am pleased to continue. We are in this Chamber talking about the Electricity and Gas Industries Bill because of the need to develop our infrastructure in that area. If United Future members, who are supporting the Government on this, want to take a better call and contribute for a little bit more than just 2 seconds, that would be very valuable. Perhaps those members should think about doing that and have more to say on this bill. United Future did not even have anybody on the Commerce Committee, so I am not too sure why that member is telling me I should be taking a narrower focus.

To continue, National has concerns about various provisions in this bill. National supports the total removal of the limits on line companies entering into generation, and that is one part of the bill we have supported. At the moment, when oil prices are at US$50 per barrel, being able to generate electricity from gas and coal reserves and looking at more sustainable forms of electricity generation as well, from wind and solar power, has to be a concern for any Government in this country for the future.

In parts of this debate we have talked about what happens when we end up being unable to invest in those sorts of structures. I am thinking about petrol and carless days, and of how that affects New Zealand. If we cannot get surety of supply it will affect businesses and the competitiveness of this country. Businesses must be able to look at New Zealand and come here thinking that they can get a good price for one of the major commodities of any business—being able to give surety of electricity supply.

I remember the spot market. I had a friend who bought a business and went on the spot market for electricity 3 years ago—the price was quite low at the time he did that. He owned a rest home, and all of a sudden he went from paying $8,000 per month to paying $20,000 per month for his electricity supply. That nearly put him out of business. Because this Government has not increased the funding to rest homes, he had no capacity to increase charges for any subsidised patients. The Minister of Health, Annette King, who is sitting over there, will know that our rest homes need to be friendly and warm in the winter. That cost went from $8,000 per month to $20,000—and that was just for a small business in New Zealand. Let us look at how that affects our major businesses—overseas investors will not look at New Zealand if they cannot feel they can come here and have a surety of supply. We need to better develop our infrastructure.

There is also concern in the National Party about proposals in the legislation covering the gas sector. That is a concern to us. National totally opposes the clauses that will allow the Government to direct the usage of infrastructure. To say that one company can develop gas fields, and then to direct that those gas fields can use somebody else’s processing infrastructure because there is spare capacity, will have a lot of people looking at whether they should invest here.

I move, That the question be now put.

I move, That the Committee divide the bill into the Electricity Amendment Bill (No 2), the Electricity Industry Reform Amendment Bill, the Commerce Amendment Bill (No 3), the Gas Amendment Bill (No 2), and the Crown Minerals Amendment Bill (No 2), pursuant to Supplementary Order Paper 242.